Definition of a Private Investor

July 15, 2009

By: Mona Johnson

Angel Investor

An angel investor is often called an informal investor or business angel. This affluent investor provides the start-up business with the capital they need. What the angel investor expects in return is either convertible debt, or ownership equity. The risk that the angel investors take are extremely high, which is why they require a high return on the investments they make. There are often numerous investors who pull all their research outlets and money together to form angel networks.

Investor's Role

Some private investors have the option to invest passively, meaning they give their funding, but they do not play a role in the company they have invested in at all. Other investors have an interest and have the necessary capital, but they do not have the entrepreneurial skills it takes to run a company. Therefore they invest with the intent of learning more from the business, and having a role in the company, or a seat on the board of directors.

Private Mortgage Investors

Some people cannot receive a loan approval from a bank to purchase a home, so they consult private mortgage investors. Some home sellers are private mortgage investors themselves, and they will carry the house mortgage, and you in return make a monthly payment. If the home buyer does not make their payments, the private mortgage investors have the same options as a bank or lending institution. This type of investor will not require the home buyer to undergo an extensive credit check like the bank would, but the terms could be more costly and not as lenient as those of a bank.

Private Equity Investors

A private equity investor is interested in acquiring businesses that are not publicly traded, or on the stock exchange. The operating businesses that they invest in just need capital to keep going. Other companies are looking to get out of the market they are operating in, therefore they allow the private equity investors to take full control of their company. The types of strategies that private equity investors use are venture capital and leveraged buyouts.

Kayne Anderson Capital Advisors

Kayne Anderson Capital Advisors is a private investing company that invests in private and public companies. Their target investment size is between $20 million and $100 million dollars. However, the company has a network of coinvestors that can arrange for larger financing if needed. They are an example of an investor that requires an active role in the companies in which they invest, including significant board representation.